Kananaskis Limited is trying to determine the amount of its ending inventory as at February 28, the company's year end. The accountant counted everything in the warehouse in early March, which resulted in an ending inventory amount of $218,000. However, the accountant was not sure how to treat the following transactions, so he did not include them in the count. He has asked for your help in determining whether or not the following transactions should be included in inventory:
1. Feb. 1 Kananaskis shipped $1,800 of inventory on consignment to Banff Corporation. By February 28, Banff had sold half of this inventory for Kananaskis.
2. 19 Kananaskis was holding merchandise that had been sold to a customer on February 19 but needed adjustments before the customer would take possession. The merchandise cost $980 and alterations, which were completed on February 21, cost $120. The customer plans to pick up the merchandise on March 2 after the alterations are complete.
3. 22 Kananaskis shipped goods FOB shipping point to a customer. The merchandise cost $1,520. The appropriate party paid the freight costs of $90. The receiving report indicates that the goods were received by the customer on March 2.
4. 23 Kananaskis received $1,600 of inventory on consignment from Craft Producers Ltd. By February 28, Kananaskis had not sold any of this inventory.
5. 25 Kananaskis purchased goods FOB shipping point from a supplier. The merchandise cost $1,350. The appropriate party paid the freight costs of $95. The goods were shipped by the supplier on February 26 and received by Kananaskis on March 3.
6. 26 Kananaskis purchased goods FOB destination from a supplier. The merchandise cost $1,500. The appropriate party paid the freight costs of $150. The goods were shipped by the supplier on February 27 and received by Kananaskis on March 4.
7. 27 Kananaskis shipped goods FOB destination costing $1,900 to a customer. The appropriate party paid the freight costs of $200. The receiving report indicates that the customer received the goods on March 7.
8. 28 Kananaskis had $1,950 of inventory isolated in the warehouse. The inventory is designated for a customer who has requested that the goods not be shipped until March 5.
Instructions
(a) For each of the above situations, specify whether the item should be included in ending inventory, and if so, at what amount. For each item that is not included in ending inventory, indicate who owns it and what account, if any, it should have been recorded in.
(b) Calculate the revised ending inventory amount.